Having a County Court Judgement on your credit profile projects you as a very risky borrower. This means that getting approval for loans becomes tough. However, you can still manage to escape this problem by taking a different route.
The type of lender you choose will make a difference in your borrowing journey. Based on their requirements, you might get a chance to borrow either by producing a guarantor or by pledging collateral. Therefore, it is possible for you to get loans for bad credit with CCJ as well.
Now, a guarantor or collateral cannot certify that you will surely get approval. It is just that they may let you qualify to apply for loans. Various assessments will be done to understand if you should be offered loans or not.
Your ability to repay loans on your own within the given timeline can prove to be beneficial. Besides, the lender will pay attention to the risk level they will have to accept. To downsize the risk factors, the lender looks for additional ways to assure repayments from your end.
These two factors can work in favour of strengthening your loan application despite carrying CCJs. Borrowing with caution will be necessary, as there are a few things you must consider while applying for loans with terrible credit scores.
What is a CCJ?
This is a court order that may be issued in England, Wales, or Northern Ireland. You will face a CCJ if you have failed to repay money you owe and the creditor wants to take legal action against you.
The details revealing your CCJ will remain in your credit records for about six years. With time, its impact may subside, provided you have maintained a positive financial history. However, it does not get dismissed completely even when the debt has been fully satisfied.
When borrowing with CCJ, you need to pay attention to various factors like affordability, income, debt-to-income ratio, employment and ongoing financial commitments.
What happens when you get a CCJ loan with a guarantor?
The main idea is to ask the borrower to involve a third party. Therefore, you must ask someone who know preferably your family members, or friends, or colleagues to become your guarantor.
The responsibilities of a guarantor are not that easy. They must be ready to commit that if you default on loan, they will pay back everything within time. This means that they should have that financial stability to afford your loan payments.
Besides, they must be having their ongoing financial responsibilities. Therefore, they should be earning well and have perfect credit scores that can establish their strong financial behaviour.
The guarantor needs to sign a legal agreement with you. They cannot leave the agreement midway. Finding someone who accepts these many things is difficult. However, if you can convince someone, getting loans with CCJ will become easier for you.
What is like getting a loan with CCJ by pledging collateral?
Here, you will be opting for secured loans. You can use your assets like your home or car to convince the lender and get access to loans despite CCJ. First, you need to find such a lender who will be ready to let you use your assets to financial assistance with very low credit scores.
Because of the involvement of assets, the lender will not bother much about CCJ. They know that they have your assets to support loan payments. Now, in case if you fail to repay loans within the duration specified by the lender, you will lose your assets forever.
The lender will recover the loan amount by selling them off. Therefore, you can use assets to get closer to loan approval, but you must make necessary arrangements to repay loans within the given duration.
What are the advantages of providing a guarantor or collateral?
The real problem you face because of CCJ is repayment uncertainty. The lender has to do something to lower your chances of missing loan payments. With a guarantor or collateral, you can show that something is there to repay on your behalf.
The different ways you can take advantage of borrowing with a guarantor or collateral are:
Expand borrowing opportunities
The involvement of a guarantor lowers lending risk. This lets the lender offer financial help to various other categories of borrowers. This also includes someone struggling a lot because of CCJ.
Establish additional financial support
A guarantor can relieve the lender who might be worrying about getting timely loan payments from your end. If anything happens that disrupts the process of repayment from borrower’s end, the lender can still get back loans on time.
They will have a guarantor supporting loan repayments on behalf of the borrower. They know that repayment will not missed at any cost. This remains the same even in the case of collateral.
In case a situation arises when the borrower cannot repay loans, the lender will have the liberty to use the assets to make up for the repayment amount.
Larger amounts might be accessible
Since lending risk reduces, the loan provider might get ready to give access to a larger amount of loan. This is because they know that repayments are not going to be missed at any cost. Now, the possibility will vary depending on the lender you choose and their terms and policies.
Repayment terms may be flexible
When there is no confusion related to getting repayment on time, the lender sees no problem to allow borrower to repay loans flexibly. However, this cannot be promised, as the lender’s willingness will completely depend on your individual circumstances.
The bottom line
Now, you might see a lot of positive sides in involving these factors while borrowing money with CCJ. There are some downsides, which you must not miss at any cost. These might be the pointers that you cannot afford to miss.
When you apply with a guarantor, they will not get any share of the loan amount approved for you. However, since they are linked to your borrowing, payments missed by you will impact them as well.
Now, with collateral, late repayments will straightaway lead to permanent loss of assets.
